–March CPI Overall +0.1%, Core Rate 0.0%
–CPI Rents Net Out Slightly Negative Again

By Denny Gulino

WASHINGTON (MNI) – The freeze-damaged tomato crop and accelerating
hospital costs weren’t enough to spoil a nearly motionless Consumer
Price Index Wednesday.

The overall CPI rose 0.1% after seasonal adjustment and before
adjustment, climbed 0.4%. The core rate showed no change adjusted and a
0.2% increase without adjustment.

“There’s not a lot in the core going up,” senior BLS analyst Steve
Reed told Market News International in the pre-release briefing.
“Shelter these days is sort of dragging. Rents have shown steady
deceleration for a while.”

The energy index was also at zero for March, and gasoline didn’t
overcome the seasonal factor expecting a more typical increase, so
declined 0.8% after adjustment. Gasoline prices actually rose 4.5% but
as driving season begins, usually bounce even higher.

So far this month, Reed said, gasoline is close to the seasonal
expectation and so “you’re not expecting a positive or a negative” in
next month’s CPI report.

The deceleration in rents was the net of an increase in the
straight rents measure offset by the heavier weighted 0.1% decline in
so-called owners equivalent rent. The broad shelter category, more than
32% of the entire CPI, was down a tenth and before adjustment, flat.

The deceleration in rents, which was thought to be a fluke when it
began about a year and a half ago, has become a steady feature of the
price index and the key reason for its moderation.

The beacon of price acceleration, on the other hand, continued to
be medical care, up overall 0.3% in March, boosted by prescription
drug’s 0.6% jump and the very strong 1.1% one-month hike in hospital
charges.

There were indications of more accelerating inflation to come in
the medical categories in an MNI Reality Check survey Tuesday, showing
prescription drug prices and insurance coverage co-payments taking off,
despite a wider use of generic drugs.

Larry Hollander, owner of Grove Pharmacy, an independent drug store
in Montclair, NJ, outside New York City, told MNI’s Claudia Hirsch that
most of his customers’ insurance plans raised drug co-pays on January 1.

“It’s a way of raising premiums without people knowing it,”
Hollander said. Generics moved from $5 and $10 to $10 and $15, and
brand-name co-pays now range up to $75.

David Certner, legislative policy director for AARP, the
Washington-based association of retirees, said drugs most widely used by
Medicare beneficiaries rose by more than 9% through the third quarter of
2009. “The price of drugs is consistently rising well above the rate of
inflation,” Certner said.

Expectations in a Market News International survey had centered on
a gain of 0.1% in both the overall March CPI and the core rate.

The three-month annualized core rate was a negative 0.2% through
March, after January’s one tenth decline and February’s one-tenth
increase. For 12-months the core rate is up just 1.1%.

Food prices rose 0.2% in March, boosted by the 4.6% increase in
fresh fruits and vegetables, “very largely” increases in tomato prices,
Reed said, the result of a freeze-induced shortage.

The CPI index number was 213.525 in March, significant because in
the third-quarter comparison to next year, it has to exceed 215.495 for
Social Security and other government transfer payment recipients to have
any kind of cost of living increase, which they are doing without this
year.

** Market News International Washington Bureau: 202-371-2121 **

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